China's Xiaomi Suddenly Surges In Worldwide Smartphone Sales

Lei Jun, Chairman and CEO of Xiaomi Technology presents the new Surge S1 chipset, at a launch event in Beijing on February 28, 2017. (NICOLAS ASFOURI/AFP/Getty Images)

When Chinese smartphones were beginning to make their way into international markets, one manufacturer with a penchant for producing high-quality handsets known as Xiaomi caught the attention of many. That was in 2011. But by the final three months of last year, the company had reached a low point in its global market share, just 3% according to data from British tech research firm Strategy Analytics. The Beijing-based manufacturer had hit supply-chain snags and under-spent on marketing despite pressure from a pack of rivals -- all hawking lookalikes of one another.

Suddenly its market share grew to 7% in the quarter that ended this September, which market research firm IDC calls Xiaomi’s highest ever. But why is the company now performing especially well?

India and China

During that quarter, Xiaomi was the second-highest selling phone vendor in India and fourth in China, two obviously major markets given their billion-plus population sizes. It even opened two new stores over the weekend in Taiwan, where consumers prefer to avoid Chinese brands (for political reasons). IDC ranked Xiaomi’s shipments as the fifth highest in the world in the second and third quarters of 2017.

Xiaomi built its market share largely on an increase in advertising and marketing, analysts say. The company with a name that means “little rice” in Chinese, for example, has sponsored televised entertainment programs in its home country over the past few quarters to wrest market share away from other domestic brands. In both China and India, the developer is adding “Mi Home” brick-and-mortar stores to increase sales, says Xiaohan Tay, senior IDC market analyst.

“In both India and China, it has been spending more on marketing and advertising to boost its sales in the market,” Tay says.

Pricing and performance

Founded in 2010 and still held as a private company, Xiaomi made its name originally by selling phones for prices as low as $320. This year it is working on improving its product designs and adding more “strong features” to its handsets, says Neil Mawston, executive director for wireless devices with market research firm Strategy Analytics. It’s also working more closely with operators on deals to sell its smartphones, he says.

Lei Jun, Chairman and CEO of Xiaomi Technology, arrives for the 2nd second plenary session of the National People's Congress at the Great Hall of the People in Beijing on March 8, 2017. (NICOLAS ASFOURI/AFP/Getty Images)

The Redmi 4X model, for example, brooks “no chance of complaints in any department,” news website techradar.com says and boasts a price tag of just CNY699 ($105). It gives the 4X special credit for its camera, display, battery life and value for money. This model stands out for its build quality and user-friendliness, another review adds. Even Xiaomi's earlier iPhone-esque models functioned well enough to justify some degree of comparison to Apple's offerings.

China, however, remains a tough sell for Xiaomi. In its home territory it must compete against domestic names such as Huawei, Oppo and Vivo for a share of the mid-tier market. This mission has long proved a challenge for the company, but for now, sales in India and elsewhere are proving strong enough to offset worries about the domestic market, says Mark Natkin, managing director with market research firm Marbridge Consulting in Beijing. “This success in India has helped make Xiaomi much less reliant on the heavily saturated China market,” Natkin says.

Those worries may resurface if India tapers and China doesn't pick up. China accounted for about three-quarters of Xiaomi’s overall smartphone sales in the third quarter of 2016, and that figure has already dwindled to less than 60%, Natkin says.

As a news reporter I have covered some of everything since 1988, from my alma mater U.C. Berkeley to the Great Hall of the People in Beijing where I followed Communist officials for the Japanese news agency Kyodo. Stationed in Taipei since 2006, I track Taiwanese companies ...